Abstract The Hedgehog (Hh) family of secreted signaling molecules plays an important role in cell fate specification, cell proliferation and differentiation. Dysfunction in Hh signaling results in abnormal embryonic development and several types of cancer in human; thus, understanding the molecular mechanisms of Hh signal transduction is of great significance for the prevention and remedy of the birth defects and cancers caused by aberrant Hh signaling. In mice, Gli2 and Gli3 zinc-finger-containing transcription factors are the primary mediators of Hh signaling. In the absence of a Hh signal, most full-length Gli3 protein (Gli3FL) is proteolytically processed to a transcriptional repressor (Gli3Rep). Gli3 processing requires C-terminal phosphorylation by protein kinase A (PKA), glycogen synthase kinase 3 (GSK3), and casein kinase 1 (CK1), and subsequent ubiquitination by SCFTrCP E3 ubiquitin ligase. Polyubiquitinated Gli3 is then processed by the proteasome. Gli3FL is predominantly localized in the cytoplasm and shuttles between the cytoplasm and nucleus, while Gli3Rep is exclusively found in the nucleus. Hh signaling counters Gli3 processing through an unknown mechanism and converts Gli3FL into an activator, Gli3Act, thus derepressing Hh target genes. The stability of Gli3, as well as Gli2, is also tightly controlled. To date, little is known at the molecular level about how Hh signaling regulates Gli3 processing, nuclear translocation, or Gli2 and Gli3 stability. Genetic and limited biochemical evidence indicates that Hh signaling regulates these molecular events through various effector molecules, though the connections between these effectors and Gli proteins are unknown. Many of these effectors are vertebrate specific, although some are conserved in Drosophila. Our objectives are to determine the role of these effectors in Hh signaling and the molecular mechanisms by which they regulate Gli2 and Gli3 function. Specifically, Aim 1 will understand the role of Dzip1 in the regulation of Gli3 function, Aim 2 will elucidate the molecular mechanism of Gli3 processing using intraflagellar transport (IFT) and Dynein gene mutants, and Aim 3 will understand the molecular basis of the Hh pathway activation in Sufu mutant. The completion of the proposed studies will significantly advance our understanding of the regulation and function of Gli3 protein in Hh signaling.